Newspaper article International Herald Tribune

Hon Hai Cash Flows to Sharp in TV Tie-Up

Newspaper article International Herald Tribune

Hon Hai Cash Flows to Sharp in TV Tie-Up

Article excerpt

The issue of the shares will give Hon Hai, the main manufacturer of Apple devices, about an 11 percent stake in Sharp, making it the top shareholder in Japan's biggest manufacturer of LCD technology.

The Japanese electronics maker Sharp said Tuesday that a Taiwanese multinational would become its top shareholder and help it produce televisions as part of a capital tie-up intended to bolster Japan's waning technological prowess.

Hon Hai Precision Industry, the electronics giant better known as Foxconn, will take a stake of about 11 percent in Sharp, giving the Japanese manufacturer a much-needed capital injection as well as access to Hon Hai's extensive manufacturing capabilities.

Sharp will issue Yen 66.5 billion, or $800 million, worth of new shares to Hon Hai, and will also sell a 46.48 percent stake in a flat-panel television factory in western Japan where the companies will produce televisions together, the two companies announced in Tokyo. Hon Hai, one of the largest electronics manufacturers in the world, also supplies Apple.

The alliance is a bold one in the world of Japanese manufacturing, where companies have long tried to make their devices themselves, a model known as vertical integration, as opposed to companies like Apple, which outsources most its manufacturing. But doing everything in-house has reached its limit, as high costs in Japan strangle profitability, said the incoming chief executive of Sharp, Takashi Okuda.

"Sharp can no longer handle everything on its own, from R&D to design, production, procurement, sales and services," said Mr. Okuda, who is set to take the helm on April 1. "In the competitive global market, Sharp's vertically integrated model has reached its limit."

Mr. Okuda said Sharp would use the proceeds from the share issue to Hon Hai to invest in new liquid crystal display technology, as well as LCD panels for mobile devices, where it expects robust demand. …

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